Lifting of crude oil export ban in US may not trigger a rally

Traders betting that US crude prices will jump above those in the rest of the world if Congress lifts America’s oil-export ban may be disappointed.

Negotiators are inching closer to a deal that would allow unfettered access to the country’s crude for the first time in 40 years.

The glut in the US that depressed prices during the height of the shale frenzy spread to the rest of the world this year. That caused global prices to sink, narrowing the discount for US crude and limiting the chances for producers to sell their oil at a better price in the export market.

While lifting the ban would limit the size of the discount for US oil, WTI would have to be at least $4 below Brent for exports to work, depending on the cost of shipping, Energy Aspects analysts wrote in a note on Friday.

West Texas Intermediate crude in Oklahoma narrowed to $1.61 a barrel below Brent oil in Europe on Monday, from as wide as $27.88 a barrel in 2011. Light Louisiana Sweet, a similar grade of crude sold on the Gulf Coast, traded at 35 cents a barrel more than Brent. It was $16.58 cheaper than the international benchmark in late 2013.

"We don’t believe at current spreads there is any impact, as exports would not be profitable," said Amrita Sen, chief oil economist at Energy Aspects in London.

The gap has shrunk as companies from TransCanada to Enterprise Products Partners added pipeline capacity from Oklahoma to the Gulf Coast, eliminating a bottleneck in the US Midwest. The current WTI-Brent differential is less than the cost of moving oil on those pipelines.